Europe's Energy Crisis

Energy in E
-From THE Leader (10-16 Sep 2022)
AUGUST 17
Linked with chapters: 2, 3, 24, 26 of Solman book.
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How to deal with Europe’s energy crisis?
Starting with the discussion of crisis we must first understand the inflation to better get to the issue.
So there are majorly two types of inflation, first the demand pull inflation and second cost push
inflation. And if we talk about the measurement of inflation so we majorly go core inflation.
The core inflation is inflation rate excluding the food and energy items from the basket used to
calculate it. The reason to exclude food and energy items from basket is that they are most sensitive
to inflation. So today we are going to focus on one of these two type of commodities, the energy.
We all know that Russian president Vladimir Putin did whatever it may take to shut down gas
pipelines to the central area of Europe as of late last year. As of now, this peril has transformed into a
reality and the chance of a cold, faint winter is evoking an emotional response. On September 5,
Russia said it would shut down its Nord Stream pipeline while Western endorsements stay set up,
raising gas costs by another 30%. They are as of now equivalent to about $400 a barrel of oil. The
energy shock is presently an out-and-out political and monetary emergency. Now this disturbance
and blockage of supply chain has caused a demand pull as well as cost push inflation in energy
products in Europe. (Hubbard & Weiner, 1986).
Also in Europe there are many families whose expenditure on energy is a big share of their incomes,
so this 30% hike + another expected futures inflation will bring them down to extremes.
The new European prime minister is saying that they have a bailout package for the firms to work on
their marginality principle, and will provide a subsidized energy for constantly next two years. But
this announcement from government has also raised the questions like why don’t government give
some handy payment to the needy and deserving ones to compensate the high price and why rather
government trying to disturb the market from letting it to adjust to the real values. Because if
government intervene in the market to provide the subsidized energy so it will hit the capitalist
sentiments of the market. If prices won’t adjust today so they will have to adjust latter in future even
with more devastating consequences. By not setting a cap on prices and not freezing the prices the
Europe will be able to maintain their people’s living standards and will not have to intervene in the
market and cause any disturbance.
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Not only the European citizens, but also firms will need assistance to save their firms from shutting
down and further spread of dominos effect that will transfer the shutting down process to other firms
as well. The government support is also limited to time and resources. If this crises continue for a
long time so we can understand what can happen to the German chemical firms that are running on
Russian gas and provided energy. Those chemical firms that contribute a lot to world will have to
shut down the process, and this will be devastating for rest of the world as well.
Similarly, when the pandemic struck, legislatures are responding with useless and not working
solutions. The books can’t provide any solutions because the matter and its scale is too big to
understand and solve. Germany is helpless and is spending a further €65bn ($65bn, or 1.8% of Gross
domestic product) on measures including a cost cap for a fundamental measure of power for families
and firms. Europe, including England, is spending no less than €450bn battling the energy shock,
even before winter has struck. Italy and Germany have burned through 2-3% of Gross domestic
product; Ms. Bracket's arrangement could push England's absolute bill to two times that(de Castro
Camioto et al., 2016).
points of Gross domestic product(McCann, 2022).
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In this way, lawmakers have begun to find out if an alternate estimating system is required. But this
crisis is not a crisis for everyone. Under the complexities of Europe's power markets, they are
followed through on the cheap spot costs regardless of whether their expenses are far lower to gas.
This isn't one of those cases: the organizations are working in profoundly directed advertisements
and may make large profits benefits that are products of the capital they have conveyed. A significant
part of the spending on top should come from more extensive expense increments(Greenberg et al.,
2008).
However, if good steps are not taken so it can harm and can bankrupt a lot of economies. The
solutions can be to not to undermine the classical way of producing energy. It must be continued to
keep an space for the innovation in energy markets and products. Old methods should be kept and
new ways to produce energy should also be found to avoid this crisis. (Franck, 2014).
In conclusion we can say the relying on the Russia for energy supplies is harmful and inflation
bearing way for Europe. It must dig out the new methods and innovations to energy.
Links with chapters:
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Chap 2: 2.1, 2.2, 2.3, 2.7, 2.8
Chap 3: 3.1, 3.2, 3.3
Chap 24: 24.1, 24.2
Chap 26: 26.1, 26.2, 23.4, 26.5
Reference
de Castro Camioto, F., Moralles, H. F., Mariano, E. B., & do Nascimento Rebelatto, D. A. (2016).
Energy efficiency analysis of G7 and BRICS considering total-factor structure. Journal of
Cleaner Production, 122, 67–77.
Franck, E. P. (2014). Financial Fair Play in European club football-what is it all about? University of
Zurich, Department of Business Administration, UZH Business Working Paper, 328.
Greenberg, A., Hamilton, J., Maltz, D. A., & Patel, P. (2008). The cost of a cloud: research problems
in data center networks. In ACM SIGCOMM computer communication review (Vol. 39, Issue 1,
pp. 68–73). ACM New York, NY, USA.
Hubbard, R. G., & Weiner, R. J. (1986). Inventory optimization in the US petroleum industry:
empirical analysis and implications for energy emergency policy. Management Science, 32(7),
773–790.
Jaswani, R. (2021). Impact of Coronavirus Disease (Covid-19) in Oil and Gas Industry. School of
Petroleum Management.
McCann, P. (2022). The Fiscal Implications of Levelling Up and UK Governance Devolution.

NIESR Occasional Paper LXIII, London: National Institute of Economic and Social Research,
Forthcoming.
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Energy in E

-From THE Leader (10-16 Sep 2022)

Linked with chapters: 2, 3, 24, 26 of Solman book.

Links with chapters:

McCann, P. (2022). The Fiscal Implications of Levelling Up and UK Governance Devolution.

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